If we divide Chinese people into different classes, separating those with overseas identities from those without, then almost all wealthy Chinese would need to obtain an overseas identity, which would trigger capital outflows and a wave of business closures...

Investigating how money for overseas assets was transferred out may not necessarily point to individuals, but individuals may not see it that way. Chinese assets could be sold off in a panic and flow to the US (solving CRS in one go, but it might come at a heavy cost).